China's Sinopec, CNPC speed up oil, gas drilling to boost output

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Sinopec employees work on pipelines connecting a Sinopec natural gas facility and Binhai transmission station of China National Petroleum Corporation's (CNPC) Dagang oilfield, ahead of the winter heating season in Tianjin, China October 22, 2018. Picture taken October 22, 2018. REUTERS/Stringer

BEIJING (Reuters) - China’s Sinopec and CNPC [CNPET.UL] are speeding up drilling and exploration from major tight and shale oil and gas formations in the country’s western regions to boost domestic output, according to company reports on Monday.

New exploration in shale gas, tight oil and tight gas will lead to growth in production for the country’s largest oil and gas producer, China National Petroleum Corporation (CNPC), the firm’s official newspaper reported on Monday, citing an internal conference from its upstream services unit.

The drilling cycle at the Mahu field in Xinjiang, one of CNPC’s largest findings in recent years, fell 40 percent from a year go, CNPC said, implying that oil wells are being completed and produced at a faster rate.

Despite having large domestic oil and gas reserves, China has become the world’s biggest importer of crude oil, and this year it is also expected to overtake Japan as the top buyer of liquefied natural gas (LNG). LNG shipments cost China around $25 billion in October alone, according to Reuters calculations.

CNPC this year increased spending in its upstream sector after a government call to safeguard China’s energy security by increasing domestic output.

Sinopec said on Monday it planned to tap 66 new natural gas wells and install 23 gas drilling stations over winter to increase supplies from its fields in southwestern China, the company said in its official newspaper.

China needs more gas because it is in the midst of a gasification push that is moving millions of households and factories from coal-fired power and heating to gas.

The aggressive gasification targets and an unusually cold winter last year caused a supply shortage.

To prevent a repeat, Chinese companies have this year increased spending on domestic production and filled up storage tanks ahead of winter.